Under Armour 2007 Annual Report Download - page 77

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13. Other Employee Benefits
The Company offers a 401(k) Deferred Compensation Plan for the benefit of eligible employees. Employee
contributions are voluntary and subject to Internal Revenue Service limitations. The Company matches a portion
of the participant’s contribution and recorded expense for the years ended December 31, 2007, 2006 and 2005, of
$0.9 million, $0.7 million and $0.4 million, respectively. Shares of the Company’s Class A Common Stock are
not an investment option in this plan.
Effective June 1, 2007, the Company’s Board of Directors approved a new Deferred Compensation Plan.
This plan allows a select group of management or highly compensated employees as approved by the
Compensation Committee, to make an annual base salary and/or bonus deferral for that specific year.
Compensation deferrals will begin for participating employees on January 1, 2008. The employee will
immediately vest in all amounts credited to their account. The Company’s prior Deferred Compensation Plan was
not implemented. As a result, at December 31, 2007 and 2006 no amounts are included on the consolidated
balance sheets relating to this plan.
14. Foreign Currency Risk Management and Derivatives
The Company is exposed to gains and losses resulting from fluctuations in foreign currency exchange rates
primarily relating to transactions generated by its international subsidiaries in currencies other than their local
currencies. In August 2007, the Company began using foreign currency forward contracts in order to reduce the
risk associated with foreign currency exchange rate fluctuations on projected inventory purchases, inter-company
payments and other general working capital requirements for its Canadian subsidiary.
As of December 31, 2007, the notional value of the Company’s outstanding foreign currency forward
contracts used to mitigate the foreign currency exchange rate fluctuations on its Canadian subsidiary’s projected
inventory purchases was approximately $6.5 million with maturities of 1 to 12 months. The foreign currency
forward contracts are not designated as cash flow hedges, and accordingly, changes in their fair value are
recorded in earnings. Unrealized losses of $0.2 million relating to outstanding foreign currency forward contracts
were included in the Company’s liabilities on the balance sheet as of December 31, 2007 and were recognized in
other income (expense), net on the consolidated statements of income during the year ended December 31, 2007.
In addition, the Company recorded $0.5 million of realized losses relating to the settlement of foreign currency
forward contracts within other income (expense), net during the year ended December 31, 2007.
The Company enters into foreign currency forward contracts with a major financial institution with
investment grade credit ratings and is exposed to credit losses in the event of non-performance by this financial
institution. This credit risk is generally limited to the unrealized gains in the foreign currency forward contracts.
However, the Company monitors the credit quality of the financial institution and considers the risk of
counterparty default to be minimal.
15. Related Party Transactions
In 2005, the Company entered into an agreement to license a software system with a vendor whose CEO is a
director of the Company. During the years ended December 31, 2007, 2006 and 2005 the Company paid $1.8
million, $1.4 million and $1.4 million, respectively, in licensing fees, maintenance fees, and development costs to
this vendor. No amounts were payable to this related party as of December 31, 2007 and less than $0.1 million
were payable to this related party as of December 31, 2006.
In 2007, the Company entered into an operating lease agreement with an entity controlled by the Company’s
CEO to lease an aircraft for business purposes. During the year ended December 31, 2007, the Company paid
$0.4 million in usage fees to this entity for the Company’s business use of the aircraft. Amounts payable to this
related party as of December 31, 2007 were $13.5 thousand.
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